The government has introduced massive changes in the taxation measures taken in the federal budget (2022-23) through a wide range of amendments made in the Finance Bill 2022 passed by the National Assembly on Wednesday.
From July 1, 2022, the Federal Board of Revenue (FBR) will charge one percent capital value tax (CVT) on motor vehicles held in Pakistan where engine capacity exceeds 1300cc and electric vehicles having battery power capacity exceeding 50kwh.
The special provisions relating to persons not appearing on the active taxpayers’ list (section 100BA) of the Income Tax Ordinance 2001 will not be applicable to the non-resident individuals holding Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP) in respect of transactions on which advance Tax on sale/purchase or transfer of immovable Property is collectible under section 236C and 2236K of the Income Tax Ordinance 2001.
The amendments in the Finance Bill 2022 revealed that the monthly tax has been increased from Rs. 50,000 to up to Rs. 200,000 on retailers and service providers excluding Tier-I retailers. The remaining tax slabs for shopkeepers based on monthly electricity bills remained the same as fixed in Finance Bill 2022.
The amended Finance Bill 2022 has granted additional privileges to the parliamentarians, the Finance Committee of the Senate or National Assembly may grant to the Chairman or the Speaker including a person who has held such office after election thereto, such additional privileges as it may be deemed fit from time to time.
The amended Finance Bill 2022 has imposed a 10 percent Super Tax for the tax year 2022 on persons including companies engaged in the business of airlines, automobiles, beverages, cement, chemicals, cigarettes/tobacco, fertilizer, iron/steel, LNG terminal, oil marketing, oil refining, petroleum and gas exploration and production, pharmaceuticals, sugar and textile where income exceeds Rs. 300 million.
Under the amended Bill, Super Tax has been imposed on high-earning persons for the tax year 2022 and onwards.
- The rate of tax would be zero percent where income does not exceed Rs. 150 million
- The tax rate would be one percent of the income where income exceeds Rs. 150 million, but does not exceed Rs. 200 million;
- The tax rate would be 2 percent where income exceeds Rs. 200 million but does not exceed Rs. 250 million;
- 3 percent tax rate where income exceeds Rs. 250 million but does not exceed Rs. 300 million, and
- 4 percent tax rate would be applicable where income exceeds Rs. 300 million.
The government has reduced sales tax from 17 percent to one percent on the import of active pharmaceutical ingredients and substances registered as drugs without the facility of an input tax adjustment. However, zero-rating of sales tax on local sales within the supply chain has been replaced with a one percent sales tax.
In the case of the online marketplace facilitating the sale of third-party goods, the liability to withhold tax on taxable supplies of such party at the sales tax rates specified shall be on the operator of such marketplace.
The amended Finance Bill 2022 has also revised the procedure of imposing a tax on deemed income basis for the tax year 2022 and onwards. The FBR replaced the words “immovable property’’ with “capital assets”. A resident person shall be treated to have derived, as income chargeable to tax, an amount equal to 5 percent of the fair market value of capital assets situated in Pakistan held on the last day of the tax year with some exclusions.
Under the revised tax slabs for the salaried class,
- Zero percent tax would be applicable where taxable income does not exceed Rs. 600,000
- The tax would be 2.5 percent of the amount exceeding Rs. 600,000 where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000;
- The rate of tax would be Rs 15,000 + 12.5 percent of the amount exceeding Rs. 1,200,000 where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 2,400,000;
- The tax rate would be 165,000 + 20 percent of the amount exceeding Rs. 2,400,000 where taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,600,000;
- The tax rate would be Rs. 405,000+25 percent of the amount exceeding Rs 3,600,000 where taxable income exceeds Rs. 3,600,000 but does not exceed Rs. 6,000,000;
- The tax rate would be Rs 1,005,000+ 32.5 percent of the amount exceeding Rs. 6,000,000 where taxable income exceeds Rs. 6,000,000 but does not exceed Rs. 12,000,000, and
- The tax rate would be Rs. 2,955,000 + 35 percent of the amount exceeding Rs. 12,000,000 where taxable income exceeds Rs. 12,000,000.
The FBR has also revised penalties for unauthorized access to the data or tampering with the system of the Pakistan Single Window (PSW).
Zero percent import duty would be applicable on the import of Smartphones in CKD/SKD conditions if imported by local assemblers/manufacturers dully certified by the Pakistan Telecommunication Authority (PTA) subject to the quota determination by the Input-Output Coefficient organization (IOCO).
Through amendments in the Finance Bill 2022, the reduced rates of tax on capital gains arising on the disposal of securities shall apply where the securities are acquired on or after July 1, 2022. The rate of 12.5 percent tax shall be charged on capital gains arising on disposal where the securities are acquired on or before June 30, 2022, irrespective of the holding period of such securities.
A mutual fund or a collective investment scheme or a REIT scheme shall deduct capital gains tax at the specified rates on redemption of securities: The individuals and association of persons are subject to 10 percent CGT for stock funds and other funds. In the case of the company, 10 percent CGT for stock funds and 25 percent for other funds.
No capital gains tax shall be deducted if the holding period of a security is more than six years, the amended Bill said.